THE SUPREME COURT OF APPEAL OF SOUTH AFRICA …

1 THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No.: 20384/2014 In the matter between: AURECON SOUTH AFRICA (PTY) LTD Appellant and CITY OF CAPE TOWN Respondent Neutral citation: Aurecon SOUTH AFRICA (Pty) Ltd v City of Cape Town (20384/2014) [2015] ZASCA 209 (9 December 2015) Coram: Maya ADP, Lewis, Bosielo, Petse and Willis JJA Heard: 21 August 2015 Delivered: 9 December 2015 Summary: Administrative review respondent seeking review and setting aside of its own decision to award tender for the decommissioning of Athlone Power Station to appellant 180 day time limit envisaged in s 7(1) of the Promotion of Administrative Justice Act 3 of 2000 not met no fraud or corruption involved in procurement process and irregularities, if any, not material no case made out for 2 the extension of time limit under s 9(1) of the Act.

2 ORDER On APPEAL from: Western Cape Division of the High COURT , Cape Town (Yekiso J sitting as COURT of first instance): 1 The APPEAL is upheld with costs. 2 The order of the Western Cape Division of the High COURT , Cape Town is set aside and replaced with the following: 1 The application is dismissed with costs. 2 Aurecon SOUTH AFRICA (Pty) Ltd (Aurecon) was, and is, not precluded, in terms of clause 95 of the City of Cape Town s Supply Chain Management Policy, the Supply Chain Management Regulations made in terms of s 168 of the Local Government: Municipal Finance Management Act 56 of 2003 or for any reason, from bidding for the City of Cape Town s Tender 459C/2010/2011 or for any tender pertaining to the decommissioning of the Athlone Power Station which is based on the draft scope of work prepared by the joint venture between Aurecon Engineering International (Pty) Ltd and ODA (Pty) Ltd.

3 3 The City of Cape Town is ordered to pay the costs of Aurecon s counter-application. 3 JUDGMENT _____ Maya ADP (Lewis, Bosielo, Petse and Willis JJA concurring): [1] This is an APPEAL against the judgment of the Western Cape Division, Cape Town (Yekiso J). The COURT a quo reviewed and set aside the decision of the City of Cape Town (the City)1 to award Tender No. 459C/2010/11: Provision of Professional Services: Decommissioning of Athlone Power Station (the tender) to the appellant, Aurecon SOUTH AFRICA (Pty) Ltd, a provider of engineering, management and specialist technical services (Aurecon), and any contract which may have come into existence between the City and Aurecon as a result of the tender award.

4 The COURT a quo further dismissed Aurecon s counter-application for a declaratory order that it is not precluded, under paragraph 95 of the City s Supply Chain Management Policy (the SCMP), the Supply Chain Management Regulations (the regulations),2 or for any other reason, from bidding for any tender pertaining to the decommissioning of the Athlone Power Station (the power station) which was based on the draft scope of work prepared by the joint venture between Aurecon Engineering International (Pty) Ltd and ODA (Pty) Ltd. [2] The litigation was instituted by the City which sought a judicial review of its own decision on the basis that reviewable irregularities occurred in the course of the evaluation of the tenders submitted to it and in the ultimate award of the tender.

5 The irregularities were said to arise from its officials ignorance as to the requirements of the various stages of the consideration and award of tenders and did not entail any fraudulent, dishonest or corrupt behaviour on the part of the 1 A metropolitan municipality as defined in s 1 of the Local Government: Municipal Structures Act 117 of 1998. 2 Made in terms of s 168 of the Local Government Municipal Finance Management Act 56 of 2003. 4 City, any of its officials or [Aurecon] . [3] The background facts are briefly these. In 2008 the City appointed a joint venture (the JV) comprising Aurecon Engineering International (Pty) Ltd,3 and ODA Consulting (Pty) Ltd4 to conduct a high level prefeasibility study into the redevelopment of the defunct power station s The JV s brief involved a study of the site, the feasibility of its development and the process necessary to prepare the site for redevelopment, as well as the compilation of a scope of work and specifications for the decommissioning of the power station.

6 In 2010 the JV submitted a draft scope of work in collaboration with the City s Electricity Services Directorate. [4] Around this time, the City considered expanding the JV s brief to include the preparation of the tender documents for the decommissioning of the power station. The idea was, however, aborted because some of the City s officials took the view that the City had the necessary skills to perform the task internally. The JV therefore did not assist in the compilation of the tender documents. It appears, though, that it was expected by relevant City officials that Aurecon would tender for the project management of the decommissioning works. At a meeting held in the City s Electrical Services Department on 1 April 2010 and in subsequent email correspondence, the City s head of Electricity Generation (Mr J Davidson) informed Aurecon s project manager (Mr J Webb) of such an assumption on his part and expressed the view that this would not give rise to any conflict of interest provided that Aurecon did not provide any input concerning the structure of preference , ie functionality vs price , and was not represented on the City s Bid 3 Aurecon s wholly-owned subsidiary then known as Africon Engineering International (Pty) Ltd).

7 4 A multi-disciplinary, non-engineering firm. 5 Athlone Power Station has not functioned since 2003. 5 Evaluation Committee (the BEC) or Bid Adjudication Committee (the BAC). [5] An invitation for tenders was duly advertised on 11 February 2011 as tender number 266C/2010/11. This bid was withdrawn on 13 May 2011 owing to queries raised about the tender document and a revised tender addressing those concerns was re-advertised as tender number 459C/2010/11. Aurecon tendered for the project on both occasions. In addition to Aurecon s tender, the City received five other tenders which were found non-responsive by the BAC (on the BEC s recommendation) for failure to comply with the relevant tender criteria. Only Aurecon s tender was considered to be responsive.

8 [6] On 31 October 2011 the BAC resolved to accept Aurecon s tender in the amount of R9 748 973. 15 (excl. VAT), from the date of commencement of contract until a date to be determined during the Section 33 [of the Local Government Municipal Finance Management Act 56 of 2003] (MFMA) process and duly notified Aurecon of its Thus, the award of the tender was final, but subject to the fulfilment of the requirements of s 33 of the MFMA. These regulate the conclusion of long-term contracts which will impose financial obligations on a municipality beyond a financial year. The award was also subject to a 21 day APPEAL period envisaged in the Municipal Systems Act7 after which Aurecon would be notified if any appeals had been lodged against the decision.

9 A few days later, Aurecon received word that an APPEAL had been lodged against the award, which was being resolved, and that it would be informed of the commencement date of the contract once that process was finalised. [7] On 17 January 2012 Aurecon received two letters from the Ci ty s Director: 6 On 4 November 2011. 7 The Local Government: Municipal Systems Act 32 of 2000. 6 Supply Chain Management (Mr L Shnaps). The first one advised that the APPEAL against the award of the tender had been resolved and that it would be contacted by the project manager for implementation of the project. The other reiterated that the commencement of the contract was subject to the conclusion of the process under s 33 of the MFMA and that Aurecon would be notified in due course when the said process had been completed.

10 All was quiet and Aurecon did not hear from the City for several months. On 29 August 2012, the approval of the award served before the City s council meeting at which concerns, which were later widely reported in the media, were raised by some council members that the tender process was tainted by corruption and irregularities. The concerns arose from Aurecon s involvement in the prefeasibility study and drafting the applicable scope of work which was alleged to have given it unfair advantage over the other tenderers. These developments prompted the City s mayor to commission auditors Ernst & Young8 to investigate, mainly, the process followed in Aurecon s appointment and whether it complied with the relevant legislation and the City s procu rement policies an d to make appropriate recommendations.